Phoenix Real Estate-Property Taxes

by Lavine Team on September 15, 2016

Phoenix Arizona Real Estate taxesIt’s that time of the year when property taxes are due in Arizona which are always billed in arrears here. On October 1st the first half of the current year’s property taxes are due. Then on the following March 1st, the second half of taxes for the preceding tax year are due.  There isn’t a tax installment payment plan (TIPP program in Calgary as an example) that allows you to pay for taxes monthly here other than in the case of a mortgaged property, the lender will have a monthly impound tax amount built in to the mortgage payment.  A homeowner without a mortgage can pay for the entire year at once if they would prefer. Payments can be made online by visiting the sites stated later on in this article.

For those of you that have purchased a property during this calendar year you should have been given a credit for taxes by the seller on your Settlement Statement when you paid for the property. They will have pre-paid you in essence the taxes for the period of time that they owned the home and thus were responsible for the applicable taxes. We always advise our clients to set that dollar amount aside so that when they get the bill in October it doesn’t come as a surprise. I have heard of some people thinking that the sellers didn’t pay their taxes and now they have to suddenly pay them but this just isn’t the case….they were forgetting that they had already been paid in advance by the sellers. It is our due diligence as Real Estate Professionals to ensure that the correct amount of this pre-paid tax from the seller is credited to you properly during the escrow process at closing on the Settlement Statement.

As an example, say you took possession of a property on July 1st (the exact mid-point of the year) and property taxes were $1100 for the preceding tax year in this case being 2016. Taxes for 2017 are not known until the end of August and so the escrow company handling the transaction is going to base the credit you will receive on prior year taxes. The seller will thus pay you as a credit against how much you owe just before closing for half of the $1100 which is $550. Then on October 1st you will be responsible to pay the first half of 2017 but the seller has already pre-paid you for this.

By September when tax bills go out, the exact assessed tax has been assessed and in the case of the last few years taxes have actually gone down in most areas so the seller probably paid you a wee bit too much as a credit. If taxes went from $1100 down to $1000 then in effect the sellers pre-paid you half of that $100 decrease….so $50 too much. On the other hand if the taxes went up then you would have to bear the small brunt of not receiving the sellers’ half of the increase….but don’t worry….you’re protected because by law  in Arizona, assessed property values won’t exceed 10% so any impact due to an increase is very limited!

Sometimes other items are added to the property tax bill that could have a slight variation to the billed amount such as small amounts of school overrides or bond issues approved by the applicable city during the course of the current or preceding year. Your tax bill will depend on where in Maricopa or Pinal County that your home is located. Cities, schools, water districts, community colleges, bond issues–all these determine your specific tax rate. The tax rate applicable to each parcel of property is the sum of the state, county, municipal, school, and special district rates. The average tax rate on homes in Arizona before exemptions and rebates is approximately 1% of market value or 10% of assessed value. So, if your home is assessed with a Full Cash Value of $250,000, and your property tax rate was exactly at the average 1%, then you’d be paying $2,500 per year in real estate tax on your home.

So what is the assessed value of a property and what are the property taxes? If you are currently on the market for a home you can find the current taxes stated in the middle-right of the detailed report that we send out from the MLS. A few lines above that you will see an 8 numeral Parcel Number identified as AN on the report. You can visit either the wwww.maricopa.gov website and scroll down the left to tax information and type in the parcel number or if your property is located in Pinal County such as in the city of Maricopa or the Queen Creek/San Tan Valley area then visit http://pinalcountyaz.gov to look up. Pay close attention as to whether or not there is a credit identified as a State Aid Tax Credit as effective this year, secondary residences do not qualify for this credit……only primary occupants so that means anyone that owns a revenue producing property or a vacation home won’t get this credit. This has an impact on a $1300 tax bill of around $250 or so… not a huge difference and in terms of comparison to taxes back home….still very reasonable & affordable for vacation or investment property homes.

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